PowerDemand – India Braces for Stronger Electricity Consumption in FY27

PowerDemand – India’s electricity consumption is projected to record a notable rise during the financial year 2026-27, with total demand expected to reach between 1,810 billion units and 1,830 billion units. According to a report released on Thursday, weather-related factors, particularly the anticipated impact of El Niño conditions, are likely to play a significant role in driving higher power usage across the country.

Weather Conditions Expected to Drive Demand

The report highlighted that electricity demand will remain closely tied to weather patterns during the current fiscal year. Higher temperatures and reduced rainfall are expected to increase the need for cooling systems in homes, offices, commercial establishments, and industrial facilities. As a result, power consumption could witness sustained growth throughout the year.

Sharp Increase Recorded in May

Electricity demand showed strong momentum in May, climbing 11.2 per cent compared with the same month last year to reach 165 billion units. Several regions across northern, western, northwestern, and central India experienced temperatures that were between one and four degrees Celsius above seasonal averages.

One of the highest temperatures recorded during the month was in Banda, Uttar Pradesh, where the mercury touched 48.3 degrees Celsius on May 12. Such extreme heat conditions contributed significantly to increased electricity usage, particularly for cooling purposes.

Growth Continues in Early Fiscal Months

During the April-May period, electricity demand expanded by 7.6 per cent year-on-year. This marks a substantial improvement from the corresponding period of the previous fiscal year, when demand had declined by 1.2 per cent.

The country’s peak power requirement also reached a new high. Peak demand touched 271 gigawatts in May, representing an increase of nearly 10 per cent compared with the previous fiscal year’s peak level of 245 gigawatts.

Industrial Activity Supports Consumption

Apart from weather-related influences, stronger industrial activity also contributed to rising electricity demand. The Manufacturing Purchasing Managers’ Index improved to 55 in May from 54.7 in April, indicating continued expansion in manufacturing operations.

Industrial and commercial users account for nearly half of India’s overall electricity consumption, making economic activity an important factor in determining future demand patterns.

Power Market Prices Move Higher

The report also pointed to increased activity in power trading markets. Volumes traded in the Real-Time Market rose around 16 per cent year-on-year to 5,529 million units during May. At the same time, the average market clearing price increased by 21 per cent to Rs 4.16 per unit.

A similar trend was observed in the Day Ahead Market, where the market clearing price rose 18.3 per cent from a year earlier to Rs 4.8 per unit, reflecting stronger demand conditions across the power sector.

Generation Capacity Expands

To meet rising consumption, electricity generation increased by approximately 12 per cent year-on-year to 178 billion units in May. Renewable energy output registered particularly strong growth of around 20 per cent.

Coal-based power generation also expanded by 12 per cent and continued to remain the backbone of the country’s electricity supply, contributing more than 68 per cent of total generation.

India further strengthened its clean energy infrastructure by adding 7.4 gigawatts of renewable energy capacity, including small hydro projects, during the first two months of the fiscal year.

Coal Inventories Decline Amid Rising Consumption

The report noted a decline in coal reserves at thermal power stations. Coal inventories stood at 49 million tonnes at the end of May, compared with 60 million tonnes during the same period a year earlier.

Stock availability dropped from 21 days to 16 days as daily coal consumption increased in response to rising electricity demand. The trend highlights the growing pressure on fuel supplies as the country prepares for another year of strong power consumption growth.